Foreign Aid FAQs – #4 “Overseas aid charities are fraudulent”

We’ve all been there – you’re walking down the high street and someone in a brightly coloured t-shirt stops you to ask for donations to help people living in poverty overseas. A nagging doubt appears in your mind: How much of my donation will actually go to the people who need help?

These doubts have been fuelled by recent newspaper articles claiming that international development charities spend a lot of money on wages and so hardly any of the money actually gets to where it’s supposed to. What a scandal! you may think, These charities are frauds, taking money that was meant for those in need. I’ll never donate to them again!

However, these claims are based on a fundamental misunderstanding of what overseas aid charities actually do. In general, these charities do not operate as cash transfer schemes. When you donate £10, that money isn’t put on a plane and flown over to be given to a family living in poverty. Why? Because while this would alleviate some of their problems in the short-term, international development charities aim to achieve much more than that. International development is about asking questions like ‘Why are these people poor in the first place?’ and tackling the root causes so that poverty can be not just alleviated but eradicated.

The issue of global poverty is much more complex than simply giving poor people money. If it were that simple we would have solved it by now. That’s why overseas aid charities carry out research to understand more about the problem so that they can tackle it more effectively; they engage in political lobbying and campaigning to try and change the rules that keep poor countries poor (e.g. tax havens and unjust trade deals); and they invest donations into projects in developing countries (e.g. irrigation and sanitation) which will have a long-term impact far in excess of what would have been achieved simply by handing over a lump sum.

When people donate to an international development charity, all of this is what their donation funds. You can think of it as like donating to a cancer research charity – that money isn’t sent directly to people with cancer, but instead funds an ongoing process aimed at permanently eradicating the problem.

“But charities waste so much money on fundraising and staff wages”

This is a completely valid concern; no-one wants any amount of their donation to be wasted. The vast majority of charities are also concerned with getting as much impact from their donations as possible. That’s why they are governed by trustees – professionals who voluntarily give their time to ensure that the charity is efficiently and effectively run.

Any business that doesn’t invest in its future is doomed to not be around for long. The same is true of charities which don’t invest in fundraising. It may leave a bitter taste in the mouth to think that a portion of your donation is paying for an advertising campaign or for the wages of the annoying person who just stopped you on the high street. But if the portion of your donation which is invested in fundraising encourages another person to donate, then you’ve essentially doubled your impact, and surely that’s worthwhile?

Charities make use of volunteers as much as possible to keep their running costs down, but there are some tasks which require a qualified person to be working on them full-time; and this means that they need to be paid. Charity workers have been portrayed in the media as dodgy and shameful, dipping their hands into funds which were meant to go to the needy. Again, this is based on a misunderstanding of what international development charities actually do. As discussed above, their workers do so much more than process donations. They don’t just enable charitable activities to happen; often their work is the charitable activity.

Sure, charity CEOs probably shouldn’t be getting 6-figure salaries, but there’s nothing dodgy about charity employees getting paid for the work they do. They have bills to pay like everybody else and join the charity sector knowing full well that they will get paid less for doing the same job than if they worked in the private sector. It may be uncomfortable to think that when you donate to charity, that money is going to pay someone’s wages. The truth is, whenever you spend money you’re paying someone’s wages.

When you hire a plumber you’re paying their wages; when you buy milk you’re paying the farmer’s and the shop assistant’s wages; when you buy an iPhone you’re paying a whole host of people’s wages – all the way from the Apple store employees to the people mining the raw materials. The point is that you’re happy to pay their wages because you want the product or service that they provide. The question is whether you think eradicating global poverty is a service which you want to be provided.

Charities have been accused of becoming ‘an industry’ or ‘too corporate’. The fact is that the modern corporation has proven to be a highly efficient and effective structure for getting things done. Just look at the enormous global reach and influence of companies like Microsoft and Coca Cola, and imagine what a charity with that kind of power and influence could achieve. If we’re serious about ending global poverty as soon as possible, surely it makes sense for charities to become as ‘corporate’ as possible, and harness this enormously powerful structure to do something good.

The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.